Canadian Pacific's Bid for Norfolk Southern

HBS Case Study No. 216-057

Posted: 2 Sep 2016

See all articles by Benjamin Esty

Benjamin Esty

Harvard Business School

Scott E. Mayfield

Harvard Business School

Date Written: May 13, 2016

Abstract

On December 16, 2015, Canadian Pacific Railroad (CPR), in conjunction with hedge fund activist William Ackman (Pershing Square), made its third bid to acquire Norfolk Southern Corporation (NSC), one of the largest railroads in the United States. Having rejected the prior offers, NSC's CEO James Squires and the NSC board must now value the current offer including the projected merger synergies as well as a recently-added contingent value right (CVR) security designed to "sweeten" the offer, and decide how to respond.

This case provides a comprehensive review of topics covered in both introductory and advanced corporate finance courses. For example, it covers acquisition bidding strategies, capital structure, DCF valuation, valuation using transaction multiples, valuation of projected synergies, the role of activist investors, corporate restructuring, fiduciary duties, option pricing, and payoff diagrams, and does so in a very interesting and current setting.

Keywords: Activist investors, M&A, synergies, DCF valuation, Contingent Value Rights (CVR), bidding, negotiation, capital structure, merger considertaion

JEL Classification: G13, G34, G24

Suggested Citation

Esty, Benjamin C. and Mayfield, Scott E., Canadian Pacific's Bid for Norfolk Southern (May 13, 2016). HBS Case Study No. 216-057, Available at SSRN: https://ssrn.com/abstract=2833293

Benjamin C. Esty (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

Scott E. Mayfield

Harvard Business School ( email )

Soldiers Field
387 Morgan Hall
Boston, MA 02163
United States
617-495-7898 (Phone)
617-496-7357 (Fax)

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